While most Americans seem to be at peace with the sequester despite MSNBC’s near non-stop efforts to have everyone panic, there are some signs that the financial industry will see a major impact from the budgets cuts.
The watchdogs who monitor the markets will see their budgets slashed. Last month, The Hill reported:
According to the Office of Management and Budget (OMB), several of the nation's top financial regulators would experience cuts of roughly 8 percent.
The Securities and Exchange Commission's (SEC) $1.3 billion budget would fall by $108 million, while the CFTC would take a $17 million haircut to its $205 million budget.
The OMB's report also states that the new Consumer Financial Protection Bureau (CFPB) -- despite not having its budget set by Congress like the SEC and CFTC -- would also face cuts totaling $34 million from its $448 million budget.
And if you think anyone from the GOP is going to vote for special funds to the SEC instead of the military, maybe you could Instagram some pics of your unicorn ride to work.
This is serious money, especially for an agency that did next to nothing to abate the mortgage and credit risk crisis in 2008. Lower operating funds mean that regulators will not be able to travel to financial services conferences, investigations will have tight or next to no funds, and further rules of Dodd-Frank and other new regulations might not get of the ground.
Today's market needs the oversight that lead up to the crash of 2008 even as it has evolved even further into a world that shies away from transparency and real-time monitoring. Look at the market we have: high-frequency trading remains the de-facto method of executing deals and algorithmic trading still leads the way despite the Flash Crash and rogue algos. All that talk about transparency? It hasn’t made a dent in the market's enthusiasm for trading via dark pools at all.
Sometimes it's easy to forget that President Obama signed into the most sweeping financial oversight law in more than 70 years a little less than three years ago. Who’d have thought that Dodd-Frank might go broke after the president was easily re-elected?
Care for some more irony? Since 2008, economists and pundits spoken endlessly that the main cause for the stagnating economy was the ceaseless uncertainty. Pick your cause: Greece, Ireland, The EU, the election, The Arab Spring, Obamacare. But with a sequester underway and the threat of a government shutdown at the end of the month, the DOW seems to be comfortably settled in 14,000s. This is, as we all know, record territory.
In these odd times, it would be prudent to have an SEC with the funds to do its job. After all, Massachusetts Senator Elizabeth Warren is only one woman.
Phil Albinus is the former editor of Advanced Trading and he currently edits the FierceFinanceIT newsletter. Follow him on Twitter at @philalbinus.